Serbs smile bravely as prices go through roof: Stoicism about hyperinflation hides an economy in ruins, writes Marcus Tanner in Belgrade

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The Independent Online
'I AM glad we never saved enough to buy a house because it might have been blown up in the fighting,' said Nevenka Arambasovic, a housewife in Belgrade. 'And I am glad we never put money in the bank because it would be worthless after all this inflation,' chimed in Branko, her husband.

They were comfortably off a few years ago but hyperinflation, the like of which has not been seen in Europe since the last days of Weimar Germany, has crunched the Arambasovics' income to nothing.

Although both still hold steady jobs, the collapse of the Yugoslav dinar has whittled down the value of their salaries to 14 Deutschmarks ( pounds 5.50) each month. Nevenka's wages in a government-owned bakery fetch a ridiculous DM2 at the hands of the street dealers of the black market. Branko can exchange his wages as a mechanic in a nearby Yugoslav army base for DM12.

Ten members of the family meanwhile pack into a two- bedroom flat in a tower block in the centre of the Serbian capital - two teenage daughters aged 14 and 18 hunker down with their mentally retarded brother, Branislav, 20, and five relatives of Mrs Arambasovic, refugees from Zadar in Croatia.

'We could not buy bread and milk on what we earn and if my brother in Frankfurt did not send 100 marks every month we would starve,' she claimed. 'Thanks to him we can buy sedatives for Branislav. In the hospital they said they had no drugs left and suggested I tie him up.'

It is only two months since the Yugoslav government lopped off six zeros from banknotes in a bid to sort out chaotic finances in Serbia, but already the price of a cup of coffee is back into the millions- of-dinars bracket. Pocket calculators have become a must for any shopper who wants to work out the price of more than a handful of items. The government prints new banknotes almost every week - a 10,000 dinar bill printed six weeks ago was followed rapidly by a 50,000 dinar bill, then a 100,000 dinar bill and 10 days ago a note for half a million. At 5pm yesterday the newest and biggest denomination was the 500 million dinar note.

Not surprisingly most items are no longer priced directly in dinars. If shoppers cannot pay in Western hard currency traders charge in 'Bods'. Taxi drivers, restaurateurs, shopkeepers and hoteliers mostly use the Bod, which is not a new currency but a simple points system. By adjusting the value of the Bod in dinars several times a day traders spared themselves the boring task of constantly adjusting their menus and price-tags in line with nearly 5 per cent inflation per hour.

But as inflation spins ever- faster out of control, the Bod looks set to follow the dinar into oblivion. Prices this week jumped 70 per cent to 100 per cent each day. As the black market dinar exchange rate with the Deutschmark skipped 10 percentage points every few hours, traders got nervous about what they should charge for Bods. Some establishments have quit both the dinar and the Bod for payment in kind - the last resort when a currency has lost all value. Belgrade zoo led the way when it announced it would accept food, such as a can of sardines or a couple of oranges, in lieu of money for entrance tickets. Some economists predict that much of Serbia's economy will switch over to barter when the supply of Deutschmarks in private hands runs dry.

Weeks before fresh parliamentary elections Serbia's ruling Socialists have successfully placed the blame for the economic debacle on sanctions. In reality sanctions are only a part of the story. Unprofitable smokestack industries have dragged down the republic's finances for decades. The damage was concealed while Communist bosses shovelled money around the country, sucking it out of profitable Croatia and Slovenia, pumping it back into Serbia.

Since these two republics cut ties with Belgrade, rump Yugoslavia has not been able to pay its own wages bill, let alone finance a war in Bosnia. Setting up Serbian statelets in Bosnia and Croatia has made things much worse. When they got Belgrade's permission to print their own currencies, which are worthless but can be legally exchanged at a rate of one-to-one with the Yugoslav dinar, the mini-states gave a massive boost to the spiral.

Not all Serbs are willing to sit back and to watch their economy go down the plughole. One man tried to set fire to himself in the middle of Belgrade outside the headquarters of Serbia's biggest private bank. Along with tens of thousands of other Serbs he had invested his life savings, 100,000 Swiss francs ( pounds 46,000) in Dafinabank, only to lose the lot when the company folded.

But many more are as laid back as the Arambasovics. To save energy and heating they lie under a mountain of blankets in the living room after supper and watch the television as it burbles away about the achievements of Slobodan Milosevic, Serbia's President. Mr Arambasovic still admires him. 'I would vote for Milosevic a hundred times,' he said. 'Yes, it is just a shame that we Serbs are a hospitable people and now we cannot even offer our guests a glass of vodka,' said his wife.

SARAJEVO (Reuter) - An artillery barrage on the main casualty hospital killed two nurses yesterday. In Geneva, Bosnia's factions reported progress in talks. The Serbian leader Radovan Karadzic said Serbs and Muslims were closer to a deal on dividing Sarajevo into 'twin cities'.

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